Consumer staples is the only sector working this quarter. These four may have room to run

Published Tue, May 3 202210:53 AM EDTUpdated Tue, May 3 20221:27 PM EDT

Consumer staples have triumphed so far this quarter, persevering as the only S & P 500 group in the green as investors look to protect their portfolios from rising inflation. While the shift in leadership and rising stock prices may signal opportunities in the sector are drying up, there may also be some overlooked names that have more room to grow. Since the start of the quarter, the consumer staples sector has risen 1.1% while the entire S & P 500 has fallen 8.3%. Meanwhile, the Consumer Staples Select Sector SPDR Fund (XLP), which tracks the sector and boasts Procter & Gamble , Costco Wholesale and Coca-Cola among its top holdings, has also gained 1%. The market moves come as the sector continues to benefit from investors rotating out of growth stocks and into safe-haven areas that perform well during periods of higher interest rates and surging inflation. As recession fears grow, consumer staples typically offer stable earnings growth, can pass along higher prices and pay investors above-average dividends. Recent data from Bank of America suggest a shift into the sector is picking up speed. Consumer staples saw one of its largest inflows last week, while the S & P 500 saw its biggest outflows since December 2020, the bank said. As investors rotate back in to the sector, CNBC Pro screened for stocks in the XLP with more room to grow. We looked for names boasting 50% or more buy ratings, consensus price targets that suggest more there may be gains ahead and stocks that are trading below, or only slightly above, five-year average forward price-earnings ratios. Here are the names that made the cut: Popular retailer Walmart is among the names in the ETF that have benefited even as inflation rises and could see more growth. Walmart's stock is up 5% this year and could add another 9.1% based on analysts' consensus price target. Even as food and fuel prices rise, the retailer has made concessions , offering gas discounts to lure customers to its Walmart+ subscription services . CEO Doug McMillon told CNBC in November that Walmart would also use surging inflation to gain market share and undercut competitors. "We're proud to try and hold prices down," he said. "Our conversations with suppliers today, tomorrow will be 'How can you help us roll back prices and swim upstream and be different than everybody else?'" Popular spirits, beer and wine producer Constellation Brands also made the cut. Its stock has slipped 2.8% this year, but its consensus price target implies 12.1% appreciation. A March screen from CNBC Pro found that the company typically performs well when the Fed starts hiking rates, and investor Sarat Sethi told CNBC's " Squawk Box " that same month that the brand could raise prices if fuel costs continue to rise. Among the other stocks that made the list, Monster Beverage has seen the biggest drop year-to-date (11.8%) but could grow 18.1% based on consensus price targets. Food processing company Lamb Weston also made the cut.

In this photo illustration, a woman's silhouette holds a smartphone with the Walmart logo displayed on the screen and in the background.

Rafael Henrique | Lightrocket | Getty Images

Consumer staples have triumphed so far this quarter, persevering as the only S&P 500 group in the green as investors look to protect their portfolios from rising inflation.